position paper
Inflation rate, as described in economics, is an increase of the price levels of
goods and services in an economy over a period of time. As stated by FocusEconomics
(2018), it refers to the overall increase in the Consumer Price Index (CPI), which is a
weighted average of prices for different goods. The index is composed of different
commodities thats why not all goods would have a price increase but it will be
depending on the country’s consumption habits. Inflation rate is basically the rise of the
prices of common good and services in a particular country. In the Philippines, the rate
of the inflation is higher compared to its previous years as part of the TRAIN law being
proposed by President Rodrigo Duterte. TRAIN law, also known as Tax Reform for
Acceleration and Inclusion law, is the process of removing tax from the income of
minimum wage earners in exchange of increasing the prices of common goods and
services which is referred to as the inflation rate. But we will not be focusing in TRAIN
law, but the inflation rate in the Philippines.
The government’s target inflation rate is 4% but it reached 6.4% which simply
shows how fast prices are rising in just a span of one year. Philippines is now the
highest among ASEAN countries. According to Social Weather Stations, the social
research institution in the Philippines, 70% of the Filipinos said that they are “kapos”
because of the inflation rate and that only 6% of Filipinos approved the government’s
handling about the current inflation rate for the reason that the savings in their bank kept
on reducing. President Rodrigo Duterte is now aware that the inflation rate in our
country is higher than expected and he stated that they are having their cabinet meeting
regarding this matter. Inflation is not bad at all, as a matter of fact government wants it,
it’s just that we, Filipinos are experiencing hyperinflation or when the prices of goods
and services rise.
The government says that the increase of prices in the economy of the
Philippines should be taken positively as it is a sign of a fast-growing economy. National
Economic and Development Authority (NEDA) Director-General Ernesto Pernia said in
an episode of GMA network’s Brigada, “Normal talaga ang pagtaas ng mga bilihin.
When the economy is growing, especially when it's growing fast talaga may inflation
effect, kasi mas mabilis ang pagtaas ng demand kesa supply. It will take time for supply
to adjust (2018)”. As Director-General Ernesto Pernia stated, “the price increase is
normal. When the economy is growing, especially when it is growing fast, there is an
inflation effect, because the demand increase faster than supply. It will take time for
supply to adjust.” This means that a fast-paced economy has consumers demanding for
more supply.
The inflation rate is said to have a good impact on the Philippines because it is
an indicator of a growing economy. However, to most consumers, it is a source of
frustration. As stated by Viola, H. (2018) in PhilStar Global, a large percentage of
respondents of their recent survey was Filipino adults and most of them have disagreed
to the price increase of their electricity bill.
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Above all, inflation rate has a negative impact to the Philippines. First, the
inflation rate does not consider families living under the poverty line. With the rise on the
prices of products and goods, the income and budget of the country must adjust to
these changes. Families living in the middle and higher class has little to no impact on
their budget and income. Therefore, they can just adjust easily to the price change.
However, the inflation rate has a much bigger impact on the budget of families who
belong in the lower class in our country. It will be harder for them to adjust and cope up
with the rise of the prices in the Philippines. As said by Dean Dennis Mapa of University
of the Philippines School of Statistics “Higher prices, particularly higher food prices—as
what we are seeing now—hurts the poor households more since 60 percent of their
budget is spent on food. During periods when inflation rates are high—example [in]
2009—poverty incidence did not decrease significantly [from 2006],”.
Second, the inflation rate just makes Filipinos poorer because they would have a
hard time living on a daily basis with goods at a higher price knowing that most of us are
thrifty. We all know that much of the population of the country is in the middle class, less
in the lower class, and only a few in the upper class. Though the middle class has
higher budgets and income compared to the lower class, eventually, they would have a
hard time adjusting to the price increase. It is still a pain for them because they have to
cut up some funds for their savings. Just like what Rep. Michael Romero of party-list
group 1-Pacman, an economist said, “Last month’s inflation rate of 5.7 percent, the
highest in more than five years, might have increased our poverty level from 23 percent
of the population to 25 percent, or nearly three out of 10 Filipinos,” (2018).
Lastly, the spending power of the Filipinos will also decrease for the very obvious
reason that the prices are increasing. Filipinos would try to switch to much cheaper
products as substitutes because of the price increase. As we all know, we are a thirdworld country so it was really a hard time experiencing the inflation that’s been
happening this 2018. As Lema K. (2018) has stated Raul Rivera, who works in a
grocery store the size of a garage in Santa Rosa, “Those who were buying five canned
goods before are now only buying three, and those who were buying 25 kilos of rice are
buying just 15 or 10 kilos now,”. Raul Rivera’s customers are buying less because of the
price increase brought by the inflation rate.
The government is now aware that the inflation that’s been happening in the
Philippines has a negative effect on them, so the socioeconomic planning secretary,
Ernesto Pernia said that the inflation rate will ease down from 6.4% to 2-4%, which is
the government’s target inflation rate by 2019. Filipino families can finally ease up
because of the inflation decrease. It is good to know that the Duterte Administration is
making an action towards this matter because most of the families were clearly affected.
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